Why Treasury bonds are so important
The U.S. Treasury will soon be selling a weekly record $104 billion in bonds to help finance some massive spending programs. Steve Chiotakis talks to Fortune Magazine's Allan Sloan about how long-term Treasury bonds affect mortgage rates.
Allan Sloan is a senior editor-at-large at Fortune (APM)
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From OH, 06/24/2009
This sketch fails to comment that the yield of treasuries is close to what it was pre-crash at 4%, and has not "tanked" compared to the bottom of treasury yields that corresponded to the bottom of the stock market (-50%), it's climbed. Further, it's important to clarify the 11% drop in YIELD is still a positive yield (in deflationary times!), compared to the 50% drop in VALUE and virtual wipeout of dividends that occurred with the stock market in the last year.
I think the tone this piece sets fails to put treasury bills in the big picture of overall investment, and that a net year over year return is something that's extremely lauded for any stock broker this year.
I think it's amazing that with a record sale volume, those 10 year treasury yields are still under what they were pre-crash. That says a great deal about the continuing demand volume for secure investments. That says the government is doing a good job of matching supply and demand now.
Now, getting into the details of who is buying those 10 years (is the government buying from itself? foreign investors? US institutions?), or comparing yields to other very secure institution 10 year yields, that would be an informative sketch.
Does the yield or the supply/demand balance in the bond market have any correlation to inflation/deflation?
From Jacksonville, FL, 06/22/2009
Unfortunately, there really wasn't much "explanation" here. It would be nice to get a straight answer, especially for all the people looking to refi or buy a house, especially for those like me hoping to get into their first house but getting spinning heads trying to keep up with the market, the mortgage rates sometimes hourly swing, and so forth. So is it bond prices go down and interest rates go down, or bond volume goes down when people sell because of inflation fears causes prices to rocket up? What's the translation, in real layman terms. Thanks.
From HI, 06/22/2009
"
selling a weekly record $104 billion in bonds
"
For every trade there are 3 players
1. The Seller
2. The Buyer
3. The House
1. The seller gets the cash
2. The buyer gets the trash
3. The house gets the commission
The house always wins.
Never be one of the losers
!
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